They believe this would have happened even without the terrorist attacks on the USA.
Housebuilders have seen profits reach record levels this year as average house prices rose sharply, thanks to low interest rates and constrained land supply. But some may see both incomes and landbank values fall.
Analyst Kevin Cammack predicted the increases, which have been running at up to 14% during the past year, will fall to 3% over the next 12 months as the economy slows down.
He said: "The large price increases are probably unsustainable and would do a lot of damage. I'd have been nervous even if we continued to see double-digit house price increases."
In a note last week, Merrill Lynch said the risk to the housebuilding sector's earnings and profitability was not as significant as in the boom-and-bust of the early 1990s. This was despite the almost certain prospect of a drop in demand as well as prices.
Cammack pointed to the tight planning restrictions that were constraining supply as positive for the sector. He said: "The tightness of the land will keep volumes low, but the bigger risk is in the prices."
Major housebuilders said demand was still relatively strong, despite slowdown concerns, though there were signs that prices were starting to come under pressure.
Ian Robertson, finance director at Wilson Bowden, said house price rises stopped in early summer and he believed the market was slowing before the 11 September attacks.
Westbury chief executive Martin Donohue said the impact on the housing sector would come next spring, as the effect of job losses around Britain were felt.
Housebuilders are surprised they haven鈥檛 seen more of a drop-off
Kevin Cammack, Merrill Lynch
Berkeley chairman Roger Lewis said: "Our sales are holding up well and we are on line to have as good an October as last year."
Cammack said: "Housebuilders are surprised they haven't seen more of a drop-off, but they are also very nervous about when it will happen and how bad it might be."
Peel Hunt analyst Stephen Rawlinson said the top end of the housing market was crumbling as investors became concerned by a possible slump. He said housebuilders were bracing themselves for the uncertainty to grow.
鈥� But tender prices are safe, says RICS
Construction tender prices will continue to increase at the current rate even if a slowdown hits the wider economy, the RICS predicted this week.
RICS chief economist Milan Khatri said the construction market was so tight that tender price increases would continue to outstrip general inflation at least until the New Year and possibly until mid-2002.
He said the labour market, with its chronic shortage of skilled workers, was mainly responsible for the continuing increases. Earnings for construction workers were growing faster than for workers in the general economy because of the shortage.
Khatri said: "Any slowdown across the wider economy that saw projects scrapped would take a while to show in the tender prices. The industry has a lag because many projects are still going through."
He made the comments as the RICS published its tender price analysis for the year to 30 June, which showed that tender prices rose 7.6%.
The general inflation rate for the period was 1.7%.
Khatri said industry workloads were still buoyant despite the terrorist attacks on the World Trade Centre in New York. But he said these could start to fall off early next year, as uncertainty caused some projects to be scrapped or delayed.
